1. Field of the Invention
The invention relates to a system and method facilitating secure electronic payment, and more particularly, to a system and methodology allowing users/account holders to control access to funds thus preventing unauthorized access to those funds.
2. Description of Related Art
The traditional methodologies for making payments include the use of currency, paper instruments such as checks, including travelers checks, electronic debit cards and/or credit cards. Each of these conventional payment methodologies have been in use for many years and have their own advantages and disadvantages. For example, paper currency has the advantage of allowing the full transaction to be completed immediately at the point of sale without the need for any further exchange after the good or services have been delivered. In the case of paper currency, the vendor receives payment in cash immediately without requiring any further effort or transaction in order to receive payment. However, paper currency may not be practical in many situations, including where there is a fear of theft or loss of the currency, or when the amount of funds to be transferred is significant. The use of paper instruments, such as checks, is also a common method for making payments. These types of instruments traditionally require a payer to establish an account with a financial institution. The account is designated with an account number which corresponds to the checks. An account holder can then write checks which provide authorization to withdraw a given amount of money from the account. Paper checks allow the transfer of significant sums of money in a relatively simple manner. However, paper checks require the payer to first set up an account with a financial institution and obtain actual paper checks in order to make a payment. Furthermore, on some occasions, checks may take several days to clear, especially for international transactions and are usually restricted to national or even local transactions. Also, merchants do not accept payment with checks because of the risk that there are inadequate funds in order to obtain payments on such checks. In addition, in many cases, the account number for a checking account may be obtained by unauthorized persons which can result in fraudulent withdrawals from the checking account.
Credit and debit cards are payment methodologies which allow for payment to vendors at the point of sale without the physical transfer of funds. In the case of debit cards, a preexisting account is electronically debited at the point of sale based upon the amount of the sale. In the case of a credit card, the payment amount is posted to the credit card authorizing bank, which makes payment and then charges the credit card holder for the amount charged. In case of both credit cards and debit cards, there is a requirement that the credit card or debit card holder have a relationship with the financial institution issuing the cards. This may require establishing an account in a case of a debit card or require pre-approved credit in the case of a credit card. Both of these payment systems are subject to fraud to the extent that debit card numbers and credit card numbers can relatively easily fall into hands of unauthorized persons. The concern over unauthorized use of debit or credit cards has caused a significant number of debit and credit card holders not to carry out transactions on the Internet or by telephone for fear of fraud and loss of personal data.
Each of the non-cash payment methodologies described above require that the person seeking the monetary instrument comply with various prerequisites which are established by the financial institutions. These prerequisites include, for example, a permanent address, an established job, a minimum income and a minimum amount of deposits. If applicants do not meet these prerequisites, the financial institution will generally reject the applicant for credit or debit card.
Thus, the conventional payment methodologies suffer from a variety of problems, including difficultly for some applicants to meet various prerequisites set by financial institutions, difficulty in handling larger monetary transactions, as well as the high possibility of fraud and misuse. For these reasons, it is desirable to establish a payment system and methodology that permits payment of both large and small amounts of money in a secure manner and which has fewer prerequisites for applicants. It is also desirable to establish a payment methodology that gives account holders the ability to control the amount of money that is accessible for payment, as well the time period during which payment can be made. A payment system and methodology that addresses these inadequacies would attract a significant number of new users to financial institutions as well as new customers for various on-line and telephone transactions.
In addition to the payment instruments described above, there are a number of additional payment instruments that are inherently not secure. For example, gift cards, telephone cards and other pre-paid cards are essentially cash equivalents that can be easily lost or stolen. Once lost or stolen, these instruments can be used by unauthorized persons. For example, a department store gift card is essentially equivalent to cash and can be used by anyone who comes into possession of it. Thus, a system and method that provides greater security for pre-paid instruments would be very desirable.
Also, in many countries, companies may pay part of their employees salaries with special checks that can be redeemed at certain food stores, restaurants and gas stations. These paper checks are ‘cash instruments’ that can be exchanged for the specific goods or services to which they are directed. These types of paper checks are easily lost, stolen or destroyed, which diminishes their potential value to the holder. In addition, the companies who provide such checks must go through certain authorizations and approvals before such checks can be issued. Thus, it is desirable in such circumstances to provide a secure payment system and methodology.